Types of Mortgage Loans – What to Look for: Making Sense of Home Financing Loan Terms & Understand the Language

Confused by all the different mortgages available for home buyers? Although interest rates change periodically based on the economy, some constants remain. When shopping for the best way to borrow money for that dream house, be armed with information and spend time deciding which is the best option before signing on the dotted line.

Fixed Rate Mortgages

The fixed rate mortgage is exactly what it sounds like – a mortgage with an interest rate that doesn’t change over the life of the mortgage. It won’t go up if interest rates soar, but on the flip side, it won’t go down if the rates drop, either.

The fixed rate generally starts out at a higher rate than the current adjustable rate because the risk of having an escalating loan rate is lower. Most experts agree that the fixed rate mortgage is a safe option for people who have low tolerance for risk or plan to stay in their home for a long time.

Adjustable Rate Mortgages (ARMs)

The adjustable rate mortgage is one that can go up or down over the life of the loan, based on the current rates when the adjustment is made. This type of loan is good for people who expect their incomes to increase over the next few years.

Although the adjustable rate loans have a higher risk than fixed rates, most ARMs have the protection of caps on how much the payments can increase or decrease, so both the lender and borrower are protected. People who don’t plan to stay in their house long may also benefit from the adjustable rate mortgage.

Balloon Mortgages

The balloon mortgage is generally based on a set amortization schedule – typically thirty years – but the term of the loan is only for five or seven years. At that point, the balance of the loan is called due. The balloon mortgage often offers much lower interest rates than fixed or adjustable rate mortgages.

Often people choose to reset the loan or refinance the house at the end of the loan. Although the interest rates with the balloon mortgage don’t change over the life of the loan, there is some risk that the rates will be significantly higher when the loan is called due, making it difficult for the borrower to refinance the home, forcing a sale of the property.

Government Backed Mortgages

A government backed mortgage often has the advantage of a low down payment, lower closing costs, competitive interest rates or easier approval for loans. Mortgages that are government backed include FHA loans and VA loans for qualifying veterans.

Other Types of Mortgages

Over the years, many different types of loans have come and gone, based on the economy, the needs of borrowers and the creativity of the financial institutions. Some of these include:

  • First time homebuyer loans
  • Interest only loans
  • Home equity loans
  • Sub-prime loans
  • Negative amortization loans

Before agreeing to any type of mortgage, do some research and know all the terms. Don’t sign unless everything is clear and stated in writing.

Loaning Money to Others: Four Mistakes I Won’t Be Making Again

Why Did I Do That?

If you’re reading this, you’re probably a pretty decent person; caring, willing to help others, and unselfish. Maybe you loaned money to a family member, a friend going through a crisis, or bless your heart, someone you barely knew? Well, you aren’t alone! These are four mistakes I will not be making again when it comes to loaning money to others.

The Perpetual Screw-up;
We all know the perpetual screw up. It’s a friend you went to college with, a family member who can’t seem to keep a job, or even a grown child who looks to you for constant financial bailout. I loaned $2,500 dollars to an old friend when she was having money problems. I love her, I knew she really needed it, and she promised to pay it back within a year. She moved from job to job, apartment to apartment, and was sometimes hard to reach, but I never expected her to never pay me back. I will never again loan money to someone who isn’t showing a true effort to take control of their financial life. I found out later that she made twice as much money as I did. She just spent it on expensive clothes, going out, and shopping. Lesson learned!

The Drug Addict:
I hate tough love! I like the warm snuggly kind of love. Unfortunately, most of us know someone addicted to drugs(meth, heroin). It can be really hard to watch them struggle and not have money for basics like food and shelter. I loaned $800 dollars to a person I had known for 5 years. He said he was ‘getting clean’ and just wanted to start over. The money was for an apartment. He spent the money on drugs. He has paid me back, now that he is clean and sober but it took 3 years. I won’t loan money to a drug addict unless I see proof they are clean and sober. If someone overdosed because they bought drugs with the money I gave them; I would have a hard time with that.

Poor Me:
I don’t know what I was thinking when I did this. One of my girlfriends was a really responsible person and I completely trusted her. We had known each other for 15 years. When she went through a divorce I helped her out financially to the tune of $5,000 dollars. A warning light should have gone off when she sat on my sofa night after night whining about her situation but doing nothing to change it. She basically lived off of the money, took her sweet time finding a job, and by the time she ‘grew up’ a little bit, our friendship was in ruins. I was so exasperated with her that I told her to keep the money. I just wanted to be away from her negativity.

Bad Credit:
I know; this is a no brainer. Why did I loan money to someone with bad credit? I’ve gone through financial hardships before, but I always pay my debt. I guess I assumed that this person would too. Bad credit can be from hospital bills or a lot of unforeseen circumstances. I loaned a person in my family $7,200 dollars for a car. We set up a repayment plan, signed documents, the whole nine yards; to this day, I’ve seen $460 dollars. Surprise, surprise. I can’t morally ‘go after’ this person. People mean more to me than any amount of money, but I did learn my lesson. People have bad credit for a reason.

Live and learn, right? I have a very kind nature and want to help others, but I had to learn that I have to put my family first. Sometimes, people need to go through tough financial times and not have a handout; then they will find a way to earn money themselves.

Private Student Loan Overview

Information on Private Student Loans for Education

With the increasing cost of college many students hope to pay for their education with grants and scholarships. When these sources are insufficient to cover the price of tuition students may need to turn to private student loans to fund the difference. Private student loans are quite different than student loans offered by the government. This overview of private student loans provides information on borrowing private money for higher education.


What Can A Student Do With A Private Student Loan?

Private student loans can be used towards any recognizable college expense, even the cost of living. Some lenders will send the funds directly to the school and any funds left over can be disbursed to the student. Some lenders will send the funding directly to the student. However, it’s the student’s responsibility to get the money to the school to cover direct tuition costs. The money the student receives after expenses are covered can be used for housing and school supplies.


Where Can A Student Receive A Private Student Loan?

Students are turning to their banks and credit unions for private student loans. These lenders usually have various processes and programs. They may require a credit check and current employment, while others may not. Some lenders want to see a student enrolled in school for at least a half time status.


There are a few different payment options issued through private loan lenders. There are also various interest rates. Most will issue a loan based on a student’s cost of attendance. The cost of attendance is the total amount the school has estimated the college expense will cost including tuition, fees, room and board, books and supplies, and other personal expenses. The lender will issue the difference between the cost of attendance and other student aid that is received.


Why Students Select Private Loan Options

Even with the increase of Federal Student Loan interest rates, students are still applying for private student loans. Some families may feel they can arrange a better rate with their own lender. Other students just do not want to have a debt with the government. Here is a non-comprehensive list of reasons a student will apply for a private student loan.


  • A student may have exceeded their aggregate loan limit
  • A student needs to cover the remainder of their tuition after Federal loans have been issued
  • A student needs additional money fast. Private loans can be issued faster than Federal loans
  • A student may attend a college that does not participate in the Federal Loan Program
  • A student defaulted on Federal Student loans and are not eligible
  • A student may have an unresolved balance with another school
  • The FAFSA application not complete or verification process on hold
  • No registration with the Selective Service (male students)
  • The student was convicted of a drug charge while receiving Federal Aid


Disadvantages of Private Student Loans

While there are many advantages of receiving a private loan, there are however disadvantages of taking a private student loan. Private loans are generally excluded from loan forgiveness programs. A student may also need a co-signer to be approved for a loan. If credit is not very good, a person could be looking at interest rates of over 18 percent. The interest will accrue while the student is in school, unlike the Stafford Unsubsidized loan. The interest rates may not be tax deductible. Finally, if a student is running into any financial problems once they are out of school, they may not be eligible for a forbearance or deferment payment option.